Reprinted from the 2013 Compliance & Ethics Professional March/April Issue
Written by Leslie Altizer
Corporate leaders have long acknowledged the importance and value of corporate culture, but historically there has been little focus on what exactly constitutes a healthy culture (or what having one is worth). To address this gap, CEB created our Corporate Integrity Index, which uses employee feedback about a firm’s culture to understand which management behaviors correlate with cultural health and to assess the returns from creating healthy cultures. In the simplest terms, healthy cultures are those where employees are encouraged and enabled to flag ethical or
operating problems early. The returns from building this sort of culture are significant: Firms whose employees rate their firm’s culture high on our integrity index outperformed peers by more than 16 percentage points in 10-year total shareholder return (see figure 1).
There are two drivers of this performance advantage. First—and more obviously—firms with healthier cultures are less likely to experience major loss from risk events, because employees feel comfortable communicating about health, safety, and fraud issues quickly. In the aftermath of the major risk events of the past few years, it is now clear that frontline employees often have a clear, early view of potential emergent risks, and healthier cultures enable and encourage them to speak up.
Second—and less intuitively—there is now powerful evidence that a healthy culture correlates strongly with employee productivity: Healthy culture companies enjoy a 12% advantage in employee productivity and performance. CEB Compliance and Ethics would like to offer a few basic guidelines to remember when building and maintaining a strong culture of integrity:
· Merchandise the virtue of openness throughout the company.
· Diagnose and intervene in culture “risk zones.”
· Adapt messages to your cultural context.